Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Credit losses at buy now, pay later group Klarna rose in the first quarter as it pursues its aggressive US expansion plans and consumers continue to struggle with high prices.
Consumer credit losses at the Swedish fintech increased 59 per cent to SKr1.2bn ($110mn) in the first quarter. A person close to the company said the main factor was its expansion in the US, which it entered in 2019.
Klarna said it “continues to grow and grow” in the US, citing a 38 per cent increase in revenues there year on year. Since the start of 2024, the company has signed partnerships in the US with Uber and Uber Eats. It is also launching a card service that will allow American customers to earn cashback and give them the option to pay over three to six months, with added interest.
Overall, net losses at Klarna more than halved in the first quarter, compared with the same period last year, to SKr323mn. The company said AI had helped cut operating expenses by about 11 per cent and that 90 per cent of its workforce was regularly using the technology. Revenues rose 29 per cent to SKr6.4bn.
Klarna was founded in 2005 and was regularly profitable until 2019, when it decided it would accept some credit losses in order to pursue US expansion. Its consumer losses had fallen by 32 per cent to SKr3.8bn in 2023, before rising again in the most recent quarter.
The increase comes at a challenging time for consumers, who are having to cope with inflation and higher interest rates. Campaigners and customer groups have criticised BNPL providers — which typically let customers divide the cost of purchases at checkout into interest-free payments — for lending to consumers without reporting to credit bureaus or consulting credit scores.
Klarna, which was once Europe’s most valuable tech company, has been preparing for a public listing, which is expected to take place in New York in the next year.
US regulators last week said BNPL companies such as Klarna should be regulated like credit card providers, meaning they would have to investigate disputes between retailers and consumers, refund returned products and cancelled services and provide consumers with billing statements.
Chief executive Sebastian Siemiatkowski criticised the proposals on X, saying they overlooked “fundamental” differences between the two, including that Klarna’s “business model relies on customers paying us back”.